tv Your Business MSNBC May 1, 2011 7:30am-8:00am EDT
and that's where the discovery comes from. smaum small business owners struggle to stay profitable in the face of rising gas prices. their gummy bears may be gigantic but they want their company to remain small, at least for now. that's all coming up next on "your business." small businesses are revitalizing the economy and american express open is here to help. that's why we are proud to present "your business" on msnbc.
hi there, everyone, i'm j.j. ramberg and welcome to "your business" where we give you tips and advice to help your business grow. gas prices continue to rise and that's hurting both consumers and the nation's small businesses. the price of a gallon of gas is now more than $4 in many american cities, which has a lot of consumers cutting back on spending. as a result, some small businesses are reeling. many entrepreneurs say they're also losing customers because they have to raise their prices to make up for rising energy costs and many small business owners are becoming increasingly pessimistic about the economy. mike runs factory services agency, a family-owned commercial heating, air conditioning and ventilation company near new orleans. he is also a member of the board of trustees of the national small business association.
great to see both of you guys. >> good morning. >> so, i'd like -- >> thank you. >> i'd like to hear how gas prices are affecting each of you. >> in the chicago area gas prices have increased 35% in the past year and nearly doubled in the past two years. in fact, many of our suppliers are passing these costs onto us with hefty fuel charges in the 20% to 30 % range. >> and are you passing those increase as long to your customers? >> well, we're all about helping people connect with flowers and we're doing everything we can to absorb those costs ourselves rather than pass them on. in fact, we haven't increased our local or nationwide delivery fees for more than four years. we're watching gas prices closely. we know we might have to increase delivery by a dollar here or there, but we are doing everything we can through new technology and good old fashioned hard work to keep those price down. >> what about you? >> we monitor gas prices fairly closely. delivery costs we see in the
delivery of equipment and things we purchase for especially construction projects, and we're able to incorporate those cos costs -- those increases into our cost when we price a job or when we bid a job. but we also do a fair amount of routine service on commercial air conditioning systems. we have been forced to add a fuel surcharge for our service trucks. >> we've gotten a lot of comments through twitter and facebook through our viewers out there. i want to read you one because it's reflecting what you're saying, which is, gunner wrote to us, the gas prices are hurting us. our customers don't realize that we have to raise our prices. our vendors are charging us more for shipping. mike, since you are adding this fuel charge, you want to know what your customers are thinking. are they responsive to it? are they upset about it? >> they haven't been upset. we tried to contact our customers. we have a fairly substantial customer base. they're pretty loyal to us. we tried to contact them and let
them know what we're going to have to do and we'll add a minimal fee. we didn't increase our service charges on an hourly basis. that overhead is pretty well fixed. quite often our service technicians may be on a job for an extended period of time. to raise a service fee is not fair to the customer. to put a fuel surcharge that kovz that one-way there and back trip, fairly minimal charge, between $5 to $10 surcharge, and that helps pay for the cost of the gasoline. our customers understand that. >> neither of you have decided to raise prices on your core products our core services. baxter, when do you think you'll have to look at this? how long do these prices have to stay high before you say, you know what, we're going to have to do this to stay in business? >> no question small business is sufficie suffering but our customers are suffering, too. we're using things like new technology, gps, cell phone, address verification on our computers to make our deliveries more he he efficient, cut the
costs on our end so we don't pass them on to the customers. we also work with 50 other local florist who is make their own floral designs but we save gas and keep the planet a little greener, too. >> on the scale of one to ten, how big of a deal are these gas prices to you? i'll started wi with you, baxte >> it's one of many prices. it's the straw on the camel's back. economic adversity forces aus all to manage our lives and businesses a little better. for example, many of our deliveries are in the chicago area. but our ten locations are in the suburbs. so, we're investing in opening a new design and dliy facility in the city for more efficient low-cost service. >> yeah, hard times often cause to you be creative and come up with good solutions. mike, how big of a problem is it for you? >> on the scale of one to ten, it's an eight or a nine. our trucks use a fuel card my guys use when they service their
trucks. that's a weekly deduct straight from the bank account with the direct pay. when you're used to paying $350 to $400 a week and all of a sudden that weekly charge goes to $650 to $700 a week it has a serious impact on cash flow and requires us to monitor everything else and pay close attention to what's going on with our cash situation. >> mike and baxter, i thank you both for sharing your situations with us. we really appreciate getting to hear how this is really affecting small businesses. thank you so much. good luck with everything. >> thank you. >> thank you. the creator of the world's largest gummy bears is dealing with quite a dilemma but it's a great problem to have. especially in today's economy. he and his business partner get so many phone calls and e-mails about their giant gummy collection that they've actually had to turn down some potential customers. at least temporarily. theirs is a business lesson in
how growing slow and steady may actually win the race. >> honestly, it was sort of born out of desperation. the whole thing started as a joke. >> reporter: the world's largest gummy bear was only supposed to be a stunt. >> the first ones were made literally in my apartment. >> reporter: but the gag gift derek lawson made for his brother has piqued the interest of many. >> we took that money, made two, then four, and now we can make upwards of 3,000 a dae. >> reporter: weighing five pounds and standing almost a foot tall, the world's largest gummy bear, which calls raleigh, north carolina, home, certainly lived up to its name. >> it's unique in and of itself. even if it was just the giant gummy bear. i say just the giant gummy bear. that's huge compared to a small one. but the world's largest is completely over the top. >> reporter: lawson and business
partner michael horowitz launched their company ggb of raleigh in 2007 with the world's largest gummy bear as their signature item. >> we knew we had a good idea and there's a market for this. >> reporter: since then revenue surpassed $1 million a year and the number of year-round employees is up about 20. while the majority of business is wholesale, anyone can buy the bears online and check out the company's own laboratory, a candy store in raleigh. >> we test out flavors, we test out the unique thing we bring to market and we see what people are saying about it. >> reporter: despite their success, lawson and horowitz are staying grounded. they're focused on a slow growth to business. >> the only mistake we could make is to grow faster than demand. >> reporter: while demand for giant gummy bears, giant gummy worms and other assorted gummy products is consistently high, lawson believes growing the company slowly is actually good business. >> even if we suppress that
growth, that's fine. that's a safer place to be, in my opinion, especially in an economy where a lot of people have overextended. >> reporter: the company's philosophy is based on lawson and horowitz's first hand experience with another struggling business. >> we melt around 15 years ago. michael and his family had a chain of candy stores. >> the low carb craze, big bocks getting involved as seeing candy to boost their sales affected us. we decided, we're going to back out of this. >> and that chain they ultimately had dwindled down to two stores and then one store. >> reporter: the message was clear. the pair had to figure out how to control the company without letting it control them. >> we're taking our time to develop. the way we would have developed it last year is different from the way we see it needs to be developed now. >> reporter: they have put in a few provisions in place to moderate growth. >> as we take on more business, we to want make sure we can also handle the business that's continuing to grow behind us. >> reporter: first off, lawson
and horowitz always put their existing customers first. >> we've always felt as we've grown a tremendous royalty to people who who have been with us as we've grown. what our first rule of thumb is, we want to make sure we can handle their demand and their wishes as we grow, because, no, they don't drive the ship for us but on the other hand they've been there. >> reporter: and production is always paced. >> when you're talking about world's largest gummy bears, we make those per the demand. let's say demanddy minimum eshs for the world's largest gummy bear. then world's largest gummy worms need attention. we're never without work. don't mistake the fact we're not making bears mean everyone's off today. there's plenty of things to make. >> reporter: even as the operation becomes more effici t efficient, they have learned to say, not now to certain customers. >> you can't always say yes to just -- just because you could doesn't mean you should do it. >> reporter: they don't want to say no to anyone but they adm admitiadmit it's inevitable.
>> we don't want to bring on you and say, where's our product and not deliver. we don't want to be that company that is not delivering as promised. >> reporter: just because a potential client may be told not now doesn't mean they'll never get their gummies. >> we're really pleased that for the most part -- we've had some of those people we've said no to who are now our customers. so, we have come back around and picked them up. they're at the front of the line. you know, we're always looking to make sure we can bring the next one in. >> reporter: another key part of lawson and horowitz's strategy is not taking money from investors. >>ist just a comfort zone. it's something i'm comfortable with. it would have been easy to go out -- we've been extended offers for loans or taken investment money. we've so far turned that don't because in a way you can't plan for and build infrastructure for something you're still writing the book on. >> reporter: with many chapters still to be written, the slow growth approach will still get top billing.
it's an approach that could treat ggb of raleigh to sweet success. >> we intend to get big fer we can grow smart and make wise decisions as we grow it, we'll have some accountability for everyone involved in it. it's hard to say no to customers but sometimes as we just saw it's the right thick thing to do. let's turn to this week's board of directors, mike hoffman editor of inc.com and les mccue author of "predictable success." great to see you. seems funny to have this guy here, too, let's see what he has to add for it. smells very good. i can smell it from here. i want to talk about this idea of saying no to customers because that is hard. and i've talked to a lot of companies who said, we just said yes and figured out how to deal with it.
what advice would you give to someone who came to you? >> do what they do. i think this is very smart. i think where you have a manufacturing business, where you're making product, have all that money tied up, it makes financial sense to build your business gradually and makes great pr sense. we're doing a story about them, right? i think it's far better knowing what you can cope with. certainly getting better at that so that the rate of increase, the rate of growth you can cope with gets bigger as time goes on than plunging head in and trying to work out later, how do i pay the bills? it's no way to build a sustainable business. >> i think people get nervous, right? here is a customer. if i don't take them on now, they'll never come back. how do you deal with that? how do you get them back later on once you have a business? >> well, you know, to les's point, entrepreneurs are optimists so it's in their nature to say yes to whatever and figure it out later.
it's fornt for them to know what can lead them into trouble, what behavior do they need to moderate. this is a great pair of entrepreneurs knowing saying yes isn't always right for their business. people have a choice. you can chose to have a great workplace or a great product rather than just trying to go for growth all the time. >> the scenario that suddenly oprah calls you up or someone big and you're not really set up for it but she suddenly is going to mention your gummy bear. do you turn it down? >> you don't necessarily need to connect the production and selling of the product with the publicity impact. for a lot of businesses, something much more mundane might be for a walmart to call you up. >> let's say walmart. >> you go along, you see them. suddenly you have to actually produce this stuff. before you know it, 15%, 20%, 25% of all of your revenues are coming from one customer. second thing happens is they
begin to squeeze down the costs a little bit, they make you trim what you're doing. before you know it, your business isn't your own anymore. you're being dictated to. so, i see the walmart effect happen quite a lot. >> i think it's important to set expectations and communicate so that if people know you're a smaller company and you get the story out about the business and that there is some scarcity, whether it's by choice or just by the level of your operations, people understand that will drive up the value of the product and, you know, you'll get a pass. i think where it becomes an issue long-term to sort of decide you're going to be small is with your people, right? a lot of people, employees, are attracted to a fast-growing, dynamic workplace. at some point are you limiting their options in terms of how they can grow. >> thanks so much, guys. >> thank you. building buzz is important for any business trying to attract new customers. here now are five ways to promote your business without breaking the bank courtesy of entrepreneur.com. first, build a network.
at trade shows and pass out business cards without spending money on a pricey booth. two, start a contest. contests can get customers involved with and excited about your product. three, be social. social media tools help a business connect with potential or current customers but stay specific in what you're doing and who you're targeting. four, reward local loyalty. offer a small gift or discount for referrals or repeat business. and, five, be a publicity hound. contribute bi-lined articles to the media. try helpareporter.com that helps journalists find experts. still to come, we answer your small business questions, including what to do when you and your partner have conflicts. and we'll have more on businesses staying small. we'll revisit a clothing company that learned that the way to customer loyalty was by offering them a limited edition product.
i'm sam chernin, owner of sammy's fish box. i opened the first sammy's back in 1966. my employees are like family, and i want people that work for me to feel that they're sharing in my success. we purchase as much as we can on the american express open gold card so we can accumulate as many points as possible. i pass on these points to my employees to go on trips with their families. when my employees are happy, my customers are happy. how can the gold card help serve your business? booming is taking care of your business by taking care of your employees. the goal of any entrepreneur is to take their business mainstream and sell their goods
and services to the masses, right? well, not always. like our gummy bear friends, a boston-based independent clothing designer decided to stay small and build his brand by keeping a lower profile. how many business owners do you know that show up at their stores in a casket? >> johnny! >> or a wooden box? well, it's all part of johnny earl's unique business. ♪ he's the founder of johnny cupcakes, a clothing brand headquartersed outside boston. a decade ago he started printing t-shirts with the name given to him at the music store where he worked. his designs gained a following. with limited resources he could only principle a few t-shirts at a time but he found out this may
work in his favor. >> girls knows more than anyone. a girl sees another girl with the same prom dress, she wants to rip off her dress. that's when it hit me. i started making my t-shirts limited edition. once i would sell out of a design, i would never make it again. some t-shirts i would number up to a certain amount so you know there's only, you know, 100 people in the entire world with that one design. >> reporter: as johnny's business grew from his parents' living room into a multimillion dollar enterprise, he turned down licensing deals from department stores and private n investo investors. >> what are they going to do when they see my tee shirrs show up in malls? that would be the worst thing in the world. that will never happen. >> reporter: numbered t-shirts, unique packaging and quirky goodies in each bag are all part of johnny's limited edition
philosophy. every t-shirt even has a little, did you >> these little additives make my customers more happy. it's like buying a box of crackerjacks or box of cereal as a kid, always surprises that add to the brand and make it more than just a t-shirt. >> this was the scene at the grand opening of the los angeles store in august of 2008. people camped out for days just to get their hands on the latest johnny cupcakes design. >> when we release something new it's like the flood gates open. >> this is the manager, and he has seen how making less product is good for business. >> it goes along with the limitness of the product. people know if they are not going to get it today and wait until next week, that it most likely won't be here, because it goes that quick. >> limited releases is one of
the ways johnny engages with the consumers, and he also holds annual halloween party. johnnys found these forge a bond between the brand and its customers. something that's not easy to do with fads come and go. johnny knows he wants to say out of the retail markets and keep johnny cupcakes as fresh as possible. >> feels like a big family and fits perfect with the brand and everything i am involved with, and where i came from. we like it that way. it's great. i could not ask for anything different. time to answer some of your business questions. mike and les are with us once again. the first question is about conflict in the workplace. >> when you have a business
partner and you often don't see eye to eye or completely clash on any given topic, what is the best way to mediate a resolution? >> happens all the time. great question. >> that's one possibility, and at the beginning you need to set down what the rules are. you should have a partnership agreement that is written including guidelines on how you will grow the business and who is in charge of what and if you are going to break up, how you're going to break up. >> plan the divorce before you get married? >> exactly. >> once you are in it, and you have not done that and you are partners and you are not seeing eye to eye, what do you do noo rock, scissor paper, every time. >> do you have a partner? >> yeah, and she worked out for her to win every time. and there is an elfent in the question whiches this, all relationships come with conflict, and that's part of it, but if you get to the point
where you have to ask for advice on how to reconcile conflict because it's happening or got to such extremes, you have to look back as to whether you are really compatible. some partnerships don't make it because they don't think through ahead of time whether or not they are prepared to put up with the conflict rerequires. it's not like a marital relationship where you have commitments and you can't break, and in a business relationship, if it doesn't work, get out. >> and then here's another question for an sba loan. >> i was fortunate to sell my home five years ago and i am not currently a homeowner, but i would love to get an sba bank guaranteed loan. as a nonhomeowner what are my options to get sba money? >> there is no rule that you have to get a home to get a loan, but it's helpful. >> the sba backs loans, and all
things being equal, they want companies to have collateral. if you don't own home, you need to be perfect in every other way. >> or have a partner maybe who will help you get the loan miles per hour. >> and it's he has money from the sale of the home, and that could be good enough. and score, score.org, they have good connections, and there is a lot of good advice there about how to make your loan application if that if you can come up with a collateral, whether it's inform or that form, that's not the issue. >> and i am starting a t-shirt business online and what are some of the positions i will need to fill on on-line businesses? will i need these people? >> yeah, a lot of online businesses starts with one person who changes hats and does it all, and how does he figure
out what he needs? >> nobody knows if you are a content provider or an it guy, and you are right, and you are right, start the business and do it yourself. there is nothing wrong with doing that, and as you understand what the requirements are, you will see what role you have to fill in order to let you get on with things. go to aelance.com, and look for good references, and then give them a try, and give people one thing to do. don't contract for a long term, and see how they do, and you put them on a part-time retainer. >> and that sounds like great advice. sounds like the questioner is maybe a marketer, and maybe a designer, and he needs to think about things and how they come along. the barriers to entry has been low, and the price of cotton is
moving around, and figuring out the pricing strategy to make sure you are making a decent margin on your t-shirts, it's tricky right now >> thank you for your advice. appreciate it. if you have questions, go to the website, openforum.com/yourbusiness. if you would like, you can e-mail your questions or comments to email@example.com. mnow let's get great ideas from small business owners just like you. >> it's an oldie but a goody. it's really simple. stay out of debt. for our small business, we are natural and organic in how we do things, and that's actually have
we grow a business. >> one important thing to do especially when you are starting out is to find a supplier who is willing to work with you on small quantities, and also be ready to replenish the small quantities quickly. >> we did a contest that everybody gets, whoever meets their sales target gets one month of maid service for your house, and that was one of the best deals ever and everybody loved the idea. you find yourself spending a large part of your budget hiring somebody to design your marketing ideas. this is a material service that provides a complete design service on fine. tweak offers templates for awful your advertising needs.
to learn more about today's show, just click on our website, and it's openfor openforum.com/yourbusiness. and don't forget to become a fan of the facebook. next week, we take aim at a firearms business that targets an unexpected demographic, women. >> a majority of women feel more comfortable talking to another woman about firearms. >> find out how an unusual gun shop operator has grown her business by attracting an under curved market. until then, i am jj ramberg, and remember, we make your business our business.